2020 (4) TMI 99 - HC - Income Tax

Disallowance of deduction u/s 80P - specific argument raised by learned counsel for the petitioner is that that the ratio of the decisions of the Division Bench should be applicable in the petitioners case to assessment for the present year as well - HELD THAT - Though the Supreme Court in the case of Parashuram Pottery Works Co. Ltd. Vs Income Tax Officer 1976 (11) TMI 1 - SUPREME COURT has stated that there should be a finality in matters of assessment and stale issues should not be reactivated beyond a particular stage, the learned Senior Standing Counsel points out that the orders of appellate authorities for previous years have not been challenged on account of the low monetary effect. In the light of the specific plea of the Standing Counsel to the effect that the issue is now being agitated further before the Supreme Court it is of the view that the matter should be permitted to reach its logical conclusion and should not be nipped at the bud, at the stage of assessment. This writ petition is dismissed though granting liberty to the petitioner to file a statutory first appeal within a period of three weeks from today. Let recovery of the demand not be enforced till disposal of the appeals by the Commissioner of Income Tax (Appeals). No costs.

Summary

Issues:
Challenge to assessment order for AY 2017-18 under Section 80P of the Income Tax Act, 1961.

Analysis:
The petitioner, a society providing credit facilities, claimed exemption under Section 80P. The Assessing Officer rejected the claim citing the Supreme Court judgment in Citizen Co-Operative Society Limited Vs. ACIT. The petitioner argued for exemption based on the principle of mutuality, claiming that all members were part of a common group. However, the officer differentiated between A and B class members, stating that B class members lacked certain rights enjoyed by A class members. The Assessing Authority concluded that the principle of mutuality did not apply due to these distinctions.

In a similar case, a Division Bench of the Madras High Court held that the society would be entitled to deduction under Section 80P, equating members and associate members under the TNCS Act. The court emphasized that for Section 80P relief, the society only needed to engage in providing credit facilities to its members. The court also highlighted the exclusion of cooperative banks under Sub-Section (4) of Section 80P, indicating that primary agricultural cooperative credit societies were eligible for the benefit.

The Revenue intended to challenge similar cases before the Supreme Court, indicating that the issue was still under consideration. The court dismissed the writ petition but allowed the petitioner to file a statutory first appeal within three weeks, with a stay on recovery of the demand until the appeal's disposal. This decision was made to allow the issue to progress to its logical conclusion, considering the ongoing legal challenges at higher courts.

In summary, the judgment addressed the petitioner's claim for exemption under Section 80P, the application of the principle of mutuality, distinctions between A and B class members, the interpretation of the TNCS Act, and the relevance of the Supreme Court judgment in Citizen Co-Operative Society Limited. The court's decision balanced the need for finality in assessments with the ongoing legal challenges, providing the petitioner with an opportunity to appeal while staying recovery of the demand.